Commercial banking in modern times is indispensable economic progress of a country. In fact, the functions of modern commercial bankers and their utility to the community are so enormous that we simply cannot afford even to imagine, let alone experience, the inconveniences we would experience if commercial banks are closed. A short strike of even one day the employees of commercial banks disrupts the entire economic activities in the country. All economic activities some directly while others indirectly-come to a standstill. It serves the community in numerous ways.
Firstly, by accepting deposits, the banks promote the habit of thrift and savings among the people. These savings of the people later result in capital formation, which is the basis of economic progress in the country. Secondly, the banks also encourage industrial innovations and business expansion through funds provided by them to the entrepreneurs. Thirdly, the banks exercise considerable influence on the level of economic activity through their ability to create money in the economy. Fourthly, through their lending policy, the banks can influence the course and direction of economic activity within the economy. Fifthly, the various utility within the economy. Fifthly, the various utility functions performed by the banks are of great economic significance for the economy.
Such functions as cheap remittance of funds, accepting and discounting bill of exchange, agency functions, such as, collection of dividends and interest on behalf of customers are very important for the working of the modern economy. In fact, the economic development of a country is not possible without a sound system of commercial banking.
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